Li Withstands Hong Kong Port Labor Strike With Shenzhen: Freight

April 10 (Bloomberg) -- Li Ka-shing, Asia’s richest man,
dominates half of the capacity at Hong Kong’s port, where a two
week-long strike threatens to send traffic to Shenzhen. That
won’t hurt Li. The billionaire controls that port as well.

Terminals backed by Li’s Hutchison Port Holdings Trust have
a 46 percent market share in Shenzhen, helping Li recoup any
loss at the Pearl River Delta. Li’s two-decade bet on the
Chinese city is proving a hedge even as workers shout slogans in
Hong Kong denouncing him for paying low wages.

“Li is smart in hedging his bets while maintaining
dominance in key markets,” Lawrence Li, an analyst at UOB-Kay
Hian Holdings Ltd. said by phone. “Even if more ships are
diverted to neighboring terminals or Shenzhen, he doesn’t have
much to lose.”

The Hong Kong port workers strike demanding a 25 percent
increase in pay and better working conditions in the former
British colony is the biggest labor revolt against the self-made
billionaire Li, 84 and nicknamed “superman” by the local media
for his investing prowess. The protests may cost Hong Kong the
title of the world’s third-biggest container port as shipping
companies realign priorities on rising costs.

Hutchison’s terminal units at Shenzhen handled 10.3 million
containers in 2011, according to the company’s latest published
annual report. The units managed 19 berths at the facility. In
comparison, the operator handled 11.7 million boxes in Hong
Kong, and along with a partner controls more than half its
capacity.

DP World

In 2012, total volumes at Shenzhen rose 1.6 percent to 22.9
million containers, according to Shenzhen Ports Association.
Hong Kong port handled 5 percent fewer boxes at 23.1 million,
Hong Kong Port Development Council data show. Li is boosting his
dominance at the facility as Hutchison Port Holdings last month
bought a box terminal from DP World Ltd. and a partner.

Evergreen Marine Corp Taiwan Ltd. and Japan’s Mitsui OSK
Lines Ltd. are among shipping lines that diverted some vessels
from Hong Kong to avoid delays caused by the strike. Some city-based manufacturers are also using Shenzhen port following the
strike, Jeffrey Lam, a member of Hong Kong chief’s executive
council said yesterday.

An “increasing number” of workers are returning to the
port, and daily financial loss narrowed to HK$2.4 million
($309,000) on April 5 from HK$5 million earlier, the company
said in an e-mail yesterday.

Workers’ unions and port contractors held negotiations
today in a bid to end the strike. The discussions will continue
tomorrow, Radio Television Hong Kong reported.

Crane Operators

About 450 dockworkers have stayed away from Li’s Hongkong
International terminals since March 28, Ho Wai-hong, a
representative of the Union of Hong Kong Dockers, said last
week. The workers, including crane operators and stevedores, are
hired by contractors and demand that the pay be raised from the
current HK$50 per hour, Ho said.

Shanghai was the world’s largest container port last year,
handling 32.5 million boxes, followed by Singapore with 31.6
million, according to a statement from the Shanghai government.

“Hong Kong was already losing market share to Shenzhen and
the strike couldn’t have come at a worst time,” said Um Kyung
A, an analyst at Shinyoung Securities Co. in Seoul. “The strike
is going to increase costs for shipping lines and that’s one
thing they can’t afford in this market.”

Flower Factory

In support of the dockworkers, about 300 crane operators,
hired by Hongkong International, began a work-to-rule action on
April 4, said Sin Hiu-yan, a spokeswoman of Hongkong
International Terminal Group Employees General Union. To play
strictly by the rulebook, the workers are now taking an on-the-ground toilet break, instead of relieving themselves aloft to
save a half-an-hour trip to the ground, Sin said.

The Hong Kong Dockers union, which represents about 500
people working at the berths of Hongkong International, has
raised about HK$3.5 million from supporters as of April 8 and
have handed out HK$1.2 million to striking workers, Ho said.

Li, who opened a plastic flower factory after World War II,
began investing in Hong Kong real estate in 1967 after riots
from China’s Cultural Revolution depressed prices. Besides ports
and real estate, his conglomerate Hutchison Whampoa has
operations in retail, energy and mobile networks.

Hutchison Whampoa has interests in 52 ports globally from
Panama to the Netherlands. The company rose 4.2 percent, the
most in more than a year, to close at HK$82 in Hong Kong today.

Expensive Housing

Labor discontent in Hong Kong has risen as its wealth gap
widens to the biggest since records started in 1971. Cathay
Pacific Airways Ltd. in December agreed on a deal with the
flight attendants union, averting labor disruptions threatened
after disagreements on wage increases and working conditions.

Record-low interest rates and an influx of buyers from
China have fueled a doubling in property prices since early
2009. That’s priced average citizens in the city of 7.1 million
people out of the market and left some unable to afford basic
necessities.

As many as 4,000 people, including port workers and their
families, took out a march on April 7, demonstrating their
discontent with Li, Apple Daily reported. Some carried Li’s
portraits, calling him “greedy” and shouting “Li Ka-shing,
pay me back.”

“Our action won’t be able to hamper Li financially as he
has so much money,” said Wong Yu-loy, another representative of
the striking dockworkers’ union. “It will hit his reputation
and show how he exploits labor by outsourcing.”